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Greenback Continues Grind Higher, NZD Underperforms

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  • Greenback strength this week has been a function of higher yields in the US, with the roughly 20bp shift higher in the US 10-yr resulting in a 0.72% advance for the USD index. With both BOJ and Fed decisions next week, USDJPY has rallied 1.35% this week as we approach the close. During today’s session, the New Zealand dollar has underperformed, falling three quarters of a percent against the dollar.
  • The final Rengo union pay tally in Japan took focus this morning, with the pay deal demand of 5.28% coming in ahead of expectations and allowing another piece of the BoJ puzzle to land in favour of a hike next week. Given the well-trailed intentions of the central bank (a JiJi report yesterday pointed heavily to the Bank preparing to exit NIRP next week), JPY failed to materially strengthen - with an expected commitment to continued bond-buying seen stabilising markets through the first potential Japanese rate hike for decades.
  • Instead, USD/JPY printed new weekly highs in response, briefly printing up at 149.17. This extends the recovery off the early March base, with the pair printing higher lows for five consecutive sessions and the pair breaching 148.82, the 20-day EMA. As we await next week’s BOJ and Fed decisions, a clear break and close above this average could suggest scope for a move towards 150.08, the Mar 6 high.
  • As mentioned, NZD is the poorest performing currency which has helped aid EUR/NZD through the 200-dma and nearing the YTD highs of 1.7937. Additionally, NZDJPY's corrective pullback off the late February highs hit a new pullback low earlier today at 90.37 and narrowing the gap with key trend support at the 90.30 100-dma. This level has helped mark the end of corrective pullbacks in the longer-term uptrend on several occasions over the past 12 months - in early Feb most recently.
  • China activity data kicks off next week’s docket before the plethora of developed and emerging market central bank decisions.
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  • Greenback strength this week has been a function of higher yields in the US, with the roughly 20bp shift higher in the US 10-yr resulting in a 0.72% advance for the USD index. With both BOJ and Fed decisions next week, USDJPY has rallied 1.35% this week as we approach the close. During today’s session, the New Zealand dollar has underperformed, falling three quarters of a percent against the dollar.
  • The final Rengo union pay tally in Japan took focus this morning, with the pay deal demand of 5.28% coming in ahead of expectations and allowing another piece of the BoJ puzzle to land in favour of a hike next week. Given the well-trailed intentions of the central bank (a JiJi report yesterday pointed heavily to the Bank preparing to exit NIRP next week), JPY failed to materially strengthen - with an expected commitment to continued bond-buying seen stabilising markets through the first potential Japanese rate hike for decades.
  • Instead, USD/JPY printed new weekly highs in response, briefly printing up at 149.17. This extends the recovery off the early March base, with the pair printing higher lows for five consecutive sessions and the pair breaching 148.82, the 20-day EMA. As we await next week’s BOJ and Fed decisions, a clear break and close above this average could suggest scope for a move towards 150.08, the Mar 6 high.
  • As mentioned, NZD is the poorest performing currency which has helped aid EUR/NZD through the 200-dma and nearing the YTD highs of 1.7937. Additionally, NZDJPY's corrective pullback off the late February highs hit a new pullback low earlier today at 90.37 and narrowing the gap with key trend support at the 90.30 100-dma. This level has helped mark the end of corrective pullbacks in the longer-term uptrend on several occasions over the past 12 months - in early Feb most recently.
  • China activity data kicks off next week’s docket before the plethora of developed and emerging market central bank decisions.